US Federal Reserve board member Lisa Cook has initiated legal action against President Donald Trump, alleging that his attempt to remove her from office was illegal. The lawsuit was filed in the US District Court for the District of Columbia following Trump's move to dismiss her this Monday, citing accusations that Cook falsified a mortgage application.

The complaint highlights the gravity of the situation, stating, "This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position which, if allowed to occur, would the first of its kind in the Board’s history. It would subvert the Federal Reserve Act (“FRA”), which explicitly requires a showing of 'cause' for a Governor’s removal, which an unsubstantiated allegation about private mortgage applications submitted by Governor Cook prior to her Senate confirmation is not."

Under the Federal Reserve Act of 1913, while the president can dismiss many executive agency heads "at-will," the removal of Federal Reserve board members is restricted to instances of "for cause," such as misconduct or malfeasance. In his announcement, Trump claimed he had "good cause" for firing Cook.

Federal Reserve board members, including Cook, play critical roles, particularly as part of the Federal Open Market Committee (FOMC), which is pivotal in setting national interest rates. In response to heightened inflation post-COVID-19, the FOMC raised interest rates in 2022, which have since remained above pre-pandemic levels. Trump has been vocal about his desire to lower these rates to spur growth and assist homebuyers, despite warnings from economists that such actions might exacerbate inflation.

This lawsuit comes amid a series of dismissals by Trump of various administrative agency heads over the past six months, a pattern that has drawn considerable attention and debate regarding the extent of executive power. Legal experts predict that Cook's case could escalate to the Supreme Court, where the justices would need to deliberate on the limits of presidential authority and the definition of "good cause."

This ongoing legal battle not only stresses the independence of the Federal Reserve but also poses significant questions about the balance of power within the federal government.